Paytm may cut value of Freecharge by 80%

BENGALURU: Paytm has signed a non-binding agreement with the SoftBank-owned Freecharge for a potential buyout of the digital payments platform in a cut-price deal, said people aware of the development. The transaction, if it comes through, may value Freecharge at $50-90 million compared with the $400 million Snapdeal paid for it two years ago.

Sources in the know of the goings-on said the final outcome of the due diligence being conducted by Paytm will determine the fate of Freecharge. A due diligence is a process through which a potential acquirer evaluates a target company or its assets for an acquisition.

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TOI had reported in its April 6 edition that SoftBank had approached potential suitors including Paytm to sell the digital payments platform at a discounted rate of $150-200 million. The Japanese group has not managed to find an interested buyer which is willing to pay more than $100 million, sources said.

Significantly, SoftBank is in final stages of closing an investment deal with Paytm, which could be one of the biggest funding rounds for an Indian startup at around $1.4 billion, TOI had reported earlier.

When contacted, a Soft-Bank spokesperson declined to comment, while an email sent to a Snapdeal spokesperson did not elicit a response till the time of going to press. A Paytm spokesperson did not respond to TOI’s query either.

“The funding deal with SoftBank for Paytm does not have Freecharge as a rider, but if Paytm is satisfied with the due diligence it will likely agree to buy Freecharge since the price has come down drastically,” a person privy to the developments said.

Over the past year or so, Freecharge has been in discussions with multiple strategic and financial investors including global payment majors like PayPal and PayU for raising fresh capital, but those talks did not materialise. Sources said, before the accelerated fall of Snapdeal and its group entities, it had managed to garner interest from investors, some of which valued the mobile wallet player at $900 million. SoftBank’s latest move is part of its founder Masayoshi Son’s attempt to consolidate its position in the Indian market. Son has put over $2 billion so far in Indian internet based startups. Paytm, which is backed by Alibaba, is the largest player in the mobile wallets market, while MobiKwik and Freecharge have been the other prominent companies.